Limiting the colors does not work for PNG with transparency in my case.
The resulting PNG does not go down to 8-Bits-Per-Pixel.
Configuration
According to the Sharp docs and the Firebase example, the output options below should work.
colours vs. colors is not an issue here.
{ "png" : { "colours":256 } }
https://sharp.pixelplumbing.com/api-output#png
Screenshot of PNG details processed by Firebase Image Resizer extension
Tested for faulty base image
pngquant
is able to reduce the base PNG with transparency to 256 colors.
The base image is not faulty.